Thailand Baht Essay Example | Topics and Well Written Essays - 500 words

Thailand Baht - Essay Example The Thai government used a majority of their foreign reserves and bought the Thai Baht so as to give strength to its currency, people were selling Baht in mass numbers and this was further weakening the currency, this step of buying the Baht restored some much needed stability and financial order in the country. â€Å"It cost the Thai government $5 billion to defend the baht, which reduced its "officially reported" foreign exchange reserves to a two-year low of $33 billion. In addition, the Thai government raised key interest rates from 10 percent to 12.5 percent to make holding baht more attractive, but because this also raised corporate borrowing costs it exacerbated the debt crisis. What the world financial community did not know at this point, was that with the blessing of his superiors, a foreign exchange trader at the Thai central bank had locked up most of Thailands foreign exchange reserves in forward contracts.† (Competing in the Global Marketplace) After making several attempts to save the Baht the government of Thailand ran out of reserves and resources and finally accepted that the peg had become implausible to defend. They did make several efforts to save the Baht but they could not succeed. The Thai government had $1.14 billion in reserves and all of it was used and even then the currency could not be saved from a freefall. The government of Thailand made earnest several efforts to save the freefall of Thai Baht, the most important measure perhaps was buying the currency by using their foreign reserves, over a billion dollars were spent on purchasing the Thai Baht but even after spending all their foreign reserves the government fell short of idea and accepted their defeat. To conclude it is fair to say that the efforts were indubitably there but the Thai government got their strategy completely wrong and this is why the currency and the